Denmark has announced the launch of offshore wind tenders with a capacity of 3 gigawatts (GW), enough to power approximately three million homes, according to a statement from the Danish Energy Ministry.

The tenders, set to open in autumn 2025, will cover two areas in the North Sea and one in the waters separating Denmark and Sweden. The initiative comes with a potential subsidy of up to 55.2 billion Danish crowns ($8.32 billion) over a span of 20 years, representing a significant investment in renewable energy infrastructure, Reuters news report said.

Context and Background

This move follows a period of uncertainty in the global offshore wind industry, marked by rising costs, increased interest rates, and persistent supply chain challenges. Earlier in 2024, Denmark halted its ongoing offshore wind tenders to reevaluate its subsidy model after failing to attract any bids in what was supposed to be its largest offshore wind auction. The lack of bidder interest was attributed to a rigid auction structure that failed to adapt to the evolving economic landscape.

Energy Minister Lars Aagaard emphasized the importance of secure, green power to reduce dependency on energy imports from Russia, a sentiment echoed across Europe amid the ongoing energy crisis. “We need more secure green power and energy to make Denmark and Europe independent of energy from Russia,” Lars Aagaard stated.

Financial Structure and Market Dynamics

The bids offered in the upcoming tenders will determine the level of subsidies, with a cap set at 55.2 billion crowns over two decades. The Danish Energy Ministry clarified that the bid prices and electricity price developments will dictate whether subsidies are necessary or if the state might even generate revenue from the projects.

Notably, Denmark’s shift in tender strategy comes after a broader industry reckoning. The offshore wind sector has been grappling with mounting financial pressure, with several governments pausing tenders due to minimal bidder participation. By setting a subsidy cap, Denmark aims to balance market incentives while mitigating financial risks for developers.

Implications for the Offshore Wind Sector

Denmark has long been a leader in wind energy, both onshore and offshore, and is home to major players like turbine maker Vestas and Orsted, the world’s largest offshore wind developer. However, the industry is at a critical juncture as companies face escalating costs and regulatory uncertainty. The new tender framework, which seeks to attract more developers by offering substantial subsidies, may serve as a bellwether for other countries navigating similar economic pressures.